What's Fueling Growth in the E-Commerce Ecosystem?
Four Key Trends

At Summit, we have invested in more than 25 companies across the e-commerce landscape. Below we discuss perspectives from these partnerships, including our views on brands, marketplaces and the technologies that enable their growth.

E-Commerce growth continues to outpace total retail sales growth dramatically. While larger category leaders tend to dominate brick and mortar retail, e-commerce has lowered barriers to entry and created opportunity for challenger brands to achieve profitable growth. An emerging ecosystem of technologies provides e-commerce brands with more opportunities than ever before to improve customer reach, drive richer engagement and fulfill increasingly higher customer expectations. We have seen technology and connectivity level the playing field for challenger brands, positioning them to beat incumbents in the digital space.

At Summit, we believe in the power of social brands and the strength of marketplaces, and we have witnessed the important difference a strong ecosystem of enabling technologies can make in supporting brand growth. Against this backdrop of increasing global e-commerce spend, expanding social connectivity and ever increasing consumer expectations, we share four key e-commerce trends that we believe are driving outsized growth in the ecosystem today.

$2.9T

Annual global spend in e-commerce

74%

of online U.S. shoppers review social media before making purchases

25%

of shoppers have canceled an order due to slow delivery speed

Brand Creation

The Power of Social Connection

Brands today go to market much differently than in recent decades. The preferences and habits of Millennial and Generation Z consumers have given rise to a new demand-generation paradigm: brand discovery. Consumers are now less receptive to traditional marketing approaches. Instead, they want to be a part of the brand creation experience. Younger consumers are more likely to trust non-traditional sources of truth when assessing new brands, products and services.

Relative to the “offline” brands of the past, digitally-native brands often leverage the power of community in the brand creation process. Earnest advocacy and concepts like earned media value have replaced traditional measures of brand reach and strength. Successful challenger brands partner with communities to co-create with their consumers. These brands create relationships with community leaders and build an audience in partnership with those community leaders. We have seen the power of this model play out in the meteoric rise of $1 billion revenue brands that were unknown just 5-10 years ago such as Fashion Nova, and in brands in the Summit Partners portfolio including Morphe, Sézane, Quay and Reverb.

Social media has become the enabling technology for this powerful community creation force. Social has changed both the “why” and “where” of a consumer buying decision and allowing brands to foster a deeper sense of customer loyalty than we have ever seen before. The next challenge for brands that have achieved success in social channels, then, is to evolve – to leverage the strength of their consumer connection and build world-class operations to support long-term, enduring global businesses.

Customer Acquisition

The Importance of “Owned Marketing” Channels

Identifying your customer and communicating with them in the right way and in real-time is critical to acquiring customers and to building and sustaining the growth of your brand. Customer-centric businesses understand the importance of collecting the right information and using that information to drive customer engagement, improve marketing performance and reduce dependence on third-party channels that, while important and productive, are not entirely in your control.

Summit portfolio company Klaviyo is at the forefront of these efforts, offering solutions that allow brands to more effectively listen to, analyze and act on their customer data. Our experience with Klaviyo and with a broader landscape of both consumer and enterprise brands has highlighted the importance of effectively leveraging data from email, website and mobile channels – the channels you “own” – to facilitate stronger customer relationships and help accelerate sales.

Many e-commerce brands know well the creative process of product design; fewer understand and fully leverage customer data and owned channels to fuel their marketing. We have seen many brands rise and then quickly fall again when their customer acquisition and go-to-market strategies are overly dependent upon third-party channels, fail to incorporate data, or are upended by algorithm changes.

Product Experience Management

Powering Compelling Brand Experiences Across Channels

With the rise of e-commerce and the proliferation of omnichannel retailing, consumers have more buying options than ever before, and they demand a consistent and compelling brand experience wherever they shop. Consumers today typically have multiple touchpoints with a brand and product before making a purchase decision, and many use mobile devices to compare product and pricing information while in-store. At each of these touchpoints, brands and retailers must deliver accurate, consistent and high-quality product information, regardless of channel, geography, language or platform.

In a continually changing and increasingly complex landscape of distribution channels and requirements, Product Information Management (PIM) solutions have enabled innovative retailers and brands to automate the workflow of product data to stay ahead of rapidly changing demand patterns and increased competition. Product Experience Management (PXM) solutions represent the next wave of innovation in product information management – essentially becoming the CRM of product data. With PXM, brands and retailers can enrich and contextualize their product information with images, descriptions and attribute sets tailored to match the buying experience at every touchpoint, allowing brands to make a more emotional connection to their customers across sales channels. PXM also enhances product searchability to meet customers wherever they are and enables brands to successfully launch new products more quickly with compelling experiences that differentiate from the competition and drive deeper customer connection. Enhanced experiences help drive increased conversions, reduced returns, improved customer satisfaction and ultimately stronger brand loyalty.

Fulfillment

Delivering at the Speed of Customer Expectations

You have established your brand. You know how to connect with your consumers. But how do you keep them coming back? For today’s consumers, delivery experience is often a critical part of the purchase decision. Consumers expect, if not demand, lightning fast turns and brands have responded through subsidized next and 2-day delivery options. Even so, industry analysts indicate that 50 percent of millennials desire even quicker time to product delivery. Our own experiences as e-commerce customers and as investors reinforce consumers’ ever increasing demands for immediacy. The e-commerce lifecycle – from product development to customer order to fulfillment – has shrunk from weeks to days to hours in some cases.

To effectively compete with Amazon and others on customer experience, brands need a thoughtful and holistic approach to fulfillment that ensures the success of last mile delivery, often the most costly and complex piece of the fulfillment process. Technologies that help to power fulfillment and logistics are an increasingly essential part of the ecosystem of enabling technologies – with many brands and retailers leveraging solutions that automate processes, provide end-to-end order visibility, and deliver business intelligence that provides actionable insights on constantly changing consumer demands and purchasing behavior. Cloud-based transportation management solutions like those from Summit portfolio company MercuryGate offer robust functionality that can scale with its customers – giving organizations large and small the ability to transform their logistics operations into a competitive advantage.

As brands move to increase ownership of their fulfillment strategy – automating processes, reducing costs and helping to drive shorter order-to-delivery times and real-time order visibility in the process – they are delivering better experiences and building and refining the flywheel of e-commerce success.

Related Experience

"With social media, you can immediately connect your product to your customer. And the best part about it for us and the team is that you get immediate feedback. So we are constantly in a dialog with our customers. We don't think of them as our audience. We think of them as our friends that we're making great product for."

Jodi Bricker

CEO, Quay

On the importance of leveraging customer data

"Companies of all sizes need to harness the power of data driven customer engagement activity to drive revenue growth."

Michael Medici

Summit Partners

On the power of emotional connection

“We believe an authentic connection with the consumer is a brand’s most important asset. If you can deliver a product or service that consumers feel emotionally connected to – and have that enthusiasm drive the consumer’s decision to promote the product on behalf of your brand – then you know you have succeeded in building a real connection between brand, consumer and their broader community.”

Matt Hamilton

Summit Partners

The ROI on product experience management:

“In an omnichannel world, product experience management (PXM) provides a critical foundation for delivering your brand experience. PXM is becoming the CRM of product data – designed to streamline a previously cumbersome process of aggregating, updating and enriching product data. Effective PXM allows brands and retailers to deliver a consistent, compelling experience across all digital and physical touchpoints, which in turn supports a consumer’s decision to purchase and promote your product.”

For more than 35 years, Summit Partners has been committed to partnering with exceptional entrepreneurs to help them accelerate their growth and achieve dramatic results. Today, Summit manages more than $19 billion in capital and targets growth equity and fixed income investments of $10 million – $500 million per company. Since inception, Summit has invested in more than 500 companies across technology, healthcare, consumer, financial technology and services, and other growth sectors.

The content herein reflects the views of Summit Partners and is intended for entrepreneurs considering partnering with Summit Partners. For a complete list of Summit Partners portfolio companies, please click here.